If your business has never installed an accounting package or hasn't had the need to look into new software for a few years, the market has definitely changed. Not only are there new, proven models for purchasing and using financial software -- think subscription and Web-based -- but you're likely to get a lot more for your money today.

Before cloud computing took hold in the market, it was a wrenching commitment to purchase financial software, according to Rick Telberg, an adviser to software vendors and accounting firms. “Choices were limited to big clunky systems installed by experts and requiring an expert to operate," he says. But now, the cloud has enabled the launch of startups in many different niches of accounting and finance; a company doesn't need to buy a big package at all. "The small business can just focus on what functions they need now and acquire those," Telberg explains.

The stages of accounting automation
Once a business starts paying and billing more than a few invoices monthly, it's time to consider an automated system to track the money. For basic startup needs, think simple, low cost, and no frills. Many of these systems are available as SaaS (software as a service) or mobile applications, with no need to install anything.

A few popular choices include Square for processing customer orders; FreshBooks for invoicing; Chrometa for billing and tracking time; Bill.com for payables and receivables; Wave, a free integrated accounting and payroll app; and SageOne for accounting, invoicing and project tracking. There are many more, of course, and today it's not unreasonable for a company to patch together its own personal financial suite from its favorite apps, says Telberg.

As your company grows and becomes more complex, perhaps adding a product line or a branch office, you'll likely need to upgrade. If more than one person is touching the system, you need e-commerce capabilities, you have an outside accounting firm that needs your data, or you're hiring a bookkeeper to enter data for hours every week, a full-featured accounting system is usually required, says Doug Sleeter, president of The Sleeter Group, a consultancy network providing accounting software advisory services to small businesses.

At this level, products from companies such as Intuit, Microsoft and Sage are common choices, although newer players operating 100 percent in the cloud, such as Xero of New Zealand, are challenging those incumbents with consumer-type interfaces, mobile apps and even new ways to do accounting. For example, Xero reverses some standard accounting processes. "Transactions show up in your bank first and then flow into the accounting system," Sleeter explains.

Making a selection
The plenitude of choices makes it tempting to simply grab something that works fine for now without anticipating future needs, especially if you don't have to install or maintain the software yourself. With financials, however, such a quick decision can backfire. Predict your company's needs five years out and purchase a system that can grow accordingly, says Wayne Schulz, an enterprise resource planning (ERP) and business software consultant. More important, though, is to consider the reality of "vendor lock-in."

"Whether you buy or rent, you will probably find yourself locked into your vendor," Schulz says. "As companies grow, the staff gets too busy to think about a new system. Plus, the vendors make it really hard to get your data out of their systems."

Spend extra time evaluating vendors for a long-term fit. Investigate the meaning behind phrases like "third-party integrations." Cloud applications are by nature easier to integrate because the software architecture is much more open and flexible than older systems. As a result, buyers might assume "integration" means that the vendor's system hooks right into another system with the click of a button. More likely, however, the integration may take some work (with extra fees) by the vendor, which may never have done that particular integration before.

Sleeter takes his clients through a checklist of required features to help narrow down vendors. Do you need to track job costs, labor costs, stock levels, inventory or sales taxes? Operating internationally requires systems that can handle multiple currencies. And then there are the specific vertical requirements, such as escrow systems for real estate businesses, or trust accounts for law firms.

Here are a few parting tips from the experts on upgrading or buying accounting software:

Modern systems, even those designed for small companies, should have reporting tools that are easy to use even if you're not an analyst. The system should allow staff to easily create reports and share them with other employees and partners, such as CPAs.

Look for features that save time and money, such as paperless billing and invoicing, or automatic sales tax updates.

If one business process consumes a lot of time in your company -- for example, billing or shipping -- make sure the system you choose has advanced capabilities in that area.

Don't obsess about switching to a cloud system if you've been using an on-premises system that you like. Most vendors of installed systems are able to host your application in the cloud so that people can access it from any location and device.

Last but not least, keep this in mind: It's better to get an accounting system before you absolutely need it, instead of waiting until your company is more mature and processes are harder to change.